On 14 June 2011, the European Court of Justice ("ECJ") ruled that EU law does not exempt leniency documents lodged with national competition agencies ("NCAs") from requests for disclosure in private actions. In a reference for preliminary ruling from a German court, Pfleiderer v Bundeskartellamt, the ECJ ruled that national courts must decide under their national procedure rules under what conditions firms seeking damages from cartelists will be allowed access to any leniency applications the cartelists have filed with the NCAs. National courts must assess case-by-case the relative merits of disclosing or protecting leniency information.
Background
Council Regulation (EC) No 1/2003 ("Regulation")
provides that NCAs and the European Commission
("Commission") may exchange information within the
European Competition Network ("ECN"), which is the
informal organization of EU NCAs. The information exchanged may
include confidential information, for the purpose of applying EU
competition law or national competition law to a case also under
investigation by the Commission.
In Pfleiderer, the German court found that, if claimants
in private actions for damages could require NCAs to disclose to
them the documents the NCAs had received pursuant to the NCAs'
leniency programmes, disclosure would chill the exchange of
information among the NCAs and between the Commission and the NCAs,
undermining ECN cooperation mechanisms. It also stated this could
deter leniency applicants from cooperating within the framework of
the leniency programmes. Leniency applicants would fear their
information might be used against them in civil claims for damages.
In this way, the applicants for leniency would be placed in a worse
position than those cartel members who do not cooperate with the
competition agencies, leading to fewer cartels being
reported.
Against this background, the German court asked the ECJ to rule on
whether victims of cartels have a right to access information and
documents voluntarily provided pursuant to a national leniency
programme.
ECJ ruling
In adopting its ruling, the ECJ observed:
- There is no binding regulation under EU law requiring that third parties be granted access to information voluntarily submitted by a leniency applicant.
- It is for Member States to establish and apply national rules on disclosure to leniency applications. In doing so, Member States must ensure that national rules do not render the application of EU cartel law impossible or excessively difficult.
- Leniency programmes are useful tools to uncover and punish cartels and therefore essential for the effective application of EU cartel law. The risk of disclosure of leniency applications to potential claimants would have a "chilling" effect on the use of leniency programmes and thus make the application of EU cartel law more difficult.
- Nevertheless, it is settled law that any individual has the right to claim damages for loss caused to him by conduct that distorts competition. The risk of damages action is a deterrent in itself against cartel behavior.
Applying these principles, the ECJ ruled that it is for national
courts to decide under their national rules on procedure whether,
and under what conditions, firms seeking damages from cartelists
will be allowed access to any leniency applications the cartelists
have filed with the NCAs. In doing so, national courts must assess,
on a case-by-case basis, the relative merits of disclosing or
protecting leniency information, taking into account all the
relevant facts of the case.
Practical implications
The ECJ ruling clarifies that the Regulation does not provide a
"one size fits all" solution to the issue of disclosure
in cartel damages actions across the EU. A tailored approach is
required, depending on the procedural rules in each Member State.
However, a number of issues remain open in practice.
First, national rules on disclosure vary significantly across the
EU. While some Member States have detailed rules on disclosure
(e.g., Germany and the UK), others do not (e.g., France, Italy and
Spain). The ECJ ruling does not consider how to deal with
situations where national rules on disclosure do not exist.
Second, the ruling concerns national leniency programmes. It is
therefore unclear what impact it may have on the EU leniency
programme. Commenting on the judgment, a spokeswoman for the
Commission said "the Commission will continue to strive to
strike the right balance between the interests of public
enforcement and private damages and will continue protection of
leniency documents as it has always done in the past".
However, two days after the ECJ's judgment in
Pfleiderer, a plaintiff in the EU switchgear cartel asked
the English High Court to order disclosure of leniency documents
given to the Commission by a cartelist. The presiding judge
questioned "if it is for me to conduct the balancing exercise,
I would want to give the Commission the chance to submit
observations". He therefore stayed the proceedings and asked
the Commission for its views. A hearing is scheduled later this
year.
Third, Pfleiderer concerns a purely domestic situation. It
is therefore unclear what impact it may have in situations
concerning multiple, parallel leniency procedures before NCAs. At
present, in the absence of an EU "one-stop-shop" leniency
procedure or an EU-wide system of fully harmonized leniency
programmes, leniency applicants may find it necessary to apply to
all the competition agencies that are involved to apply EU cartel
law. The Commission and NCAs can exchange information relating to
these multiple leniency applications. The ECJ ruling does not deal
specifically with disclosure requests concerning leniency documents
exchanged by the competition authorities.
Fourth, for several years now, the Commission has been trying to
adopt EU legislation on private antitrust enforcement, with the aim
of harmonizing and encouraging actions for damages across the EU.
Thus far the Commission has failed to reach a workable compromise.
The Commission may see the Pfleiderer ruling as just
another step away from its plan for an EU harmonized private
enforcement system.
Fifth, the ECJ ruling fails to draw a distinction between (a)
voluntary presentations by leniency applicants on their knowledge
of a cartel and their role therein, prepared especially to be
submitted under a national leniency programme ("corporate
statements"), and (b) pre-existing documents submitted by the
leniency applicants together with their corporate statements. On
one hand, it may be that the risk of disclosure of corporate
statements is more perceived than real, since most of the leniency
programmes that are operated in the EU provide for an oral
procedure, which is designed to protect corporate statements from
discovery in civil damage procedures. On the other, access to
pre-existing documents may pose confidentiality issues.
Conclusion
In an ideal world, private enforcement requirements and procedures would be harmonized throughout the EU, to avoid the risk of inconsistent approaches at the national level. The ECJ's judgment in Pfleiderer confirms that, absent EU harmonized legislation on this, disclosure in action for damages remains a matter of national law in each Member State.
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